Bank of America, Credit Suisse and UBS have joined the Bank of New York Mellon’s Open Platform for Unregistered Securities, or OPUS-5, a private exchange for privately offered securities traded under Rule 144A of the Securities Act of 1933.
Citi, Lehman Brothers, Merrill Lynch and Morgan Stanley were founding members of the exchange, which was launched last month.
“The addition of Bank of America, Credit Suisse and UBS will further promote liquidity and efficiency for qualified institutional buyers who trade 144A equity securities and enhance issuers’ capital raising efforts”, the banks said in a statement.
OPUS-5 and platforms like it make it possible for private equity groups to monetise their management companies and realise additional capital from sophisticated institutional investors, without the additional disclosure and reporting demands of the public markets. It may also serve as a “test-run” prior to a public listing.
Goldman Sachs established the first such private exchange, GSTrUE, this May. Oaktree Capital Management listed 15 percent of its management company on GSTrUE in May, raising $880 million, and Apollo Capital Management followed suit in August, raising $828 million (€595 million).
Financial institutions have been eager for market share in this new space: OPUS-5 and Bear Stearns’ Best Markets were established soon after GSTrUE, while Nasdaq's PORTAL was turned from a review and approval system for 144A securities into an online marketplace last month. Los Angeles- and New York-based financial services holding company Zealous Holdings has also created a private electronic marketplace dubbed ZATS.
The initial scramble might be a response to high demand on both the buy side and the sell side, said Michael Littenberg, a business transactions lawyer at Schulte Roth & Zabel.
“I think the way some platform operators are looking at this is that it’s better to have a toe in the water and get some market share,” Littenberg said. “You can always combine with another platform down the road if it makes sense.”